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ACCA Applied Knowledge · Management Accounting · Performance measurement - application

A school's budget for the year was $1,200,000 for 800 pupils. Actual spending was $1,260,000 for 840 pupils, and the pass rate in national exams rose from 70% to 75%. Cost per pupil is used as the measure of efficiency. Which conclusion is correct?

Cost per pupil was $1,500 in both the budget (1,200,000/800) and the actual result (1,260,000/840), so efficiency on this measure did not change. The rise in pass rate from 70% to 75% is an effectiveness gain, not an efficiency change.

  1. ACost per pupil rose from $1,500 to $1,550 so efficiency worsened
  2. BCost per pupil was $1,500 in both budget and actual, so there was no efficiency change, though the pass rate improvedCorrect
  3. CCost per pupil fell from $1,550 to $1,500 so efficiency improved
  4. DCost per pupil cannot be used because the pass rate changed

Explanation

Budget cost per pupil: 1,200,000/800 = $1,500. Actual: 1,260,000/840 = $1,500. The unit cost is unchanged, so there was no change in efficiency on this measure. The higher pass rate is an effectiveness improvement and does not alter the cost-per-pupil calculation. The other options use wrong figures.

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